Springboard of Resilience

The evolving dynamics of global trade require nations to balance economic pragmatism with strategic foresight. In 2025, the United States revised its tariff regime for all its trading partners. For India, a 26 per cent tariff on a broad spectrum of Indian exports, impacting several key sectors was announced. Despite the disruption, India’s response has been measured, forward-looking, and grounded in a long-term commitment to resilience and global integration.

India’s trade relationship with the United States has matured steadily. In FY2024–25, bilateral trade reached USD 130 billion, with India exporting USD 86.5 billion worth of goods to the US—an 11.6 per cent increase year-on-year. The US remains India’s largest trading partner, accounting for nearly 18 per cent of total Indian goods exports. These shipments span a wide range: pharmaceuticals, textiles, auto parts, machinery, and precision equipment. While the relationship has experienced periods of tension over tariffs and market access, both countries have continuously expanded cooperation in key sectors such as healthcare and digital trade.

The recent tariff action, framed around the principle of reciprocity, imposed a uniform 26 per cent duty on most Indian imports into the US, exempting critical sectors such as pharmaceuticals and energy. India’s textile exports to the US, which stood at USD 8.8 billion in 2024–25, were heavily impacted, as were gems and jewellery, which accounted for USD 13.3 billion in exports, including USD 6 billion in diamonds. Auto component exports to the US, valued at USD 6.8 billion, also faced pricing and competitiveness pressures. While the tariffs introduced cost burdens, the Indian government responded with diplomatic composure, emphasising the importance of preserving long-term trade stability. During the recent meeting of the US Vice President, JD Vance, and the Indian Prime Minister, both leaders expressed satisfaction at the progress being made in the initial negotiations.

Rather than mirror the US tariffs with retaliatory duties, India accelerated engagement through formal trade talks. By reaffirming its commitment to resolving disputes through dialogue and signalling readiness to revisit certain import duties, India maintained its reputation as a credible and constructive global partner. Negotiations over an early harvest trade agreement were revived, focusing on tariff rationalisation, digital services, and mutual market access.

Domestically, the government responded swiftly to the concerns of affected sectors. Consultations with industry stakeholders informed a support package targeting small and medium exporters. This included expanding access to subsidised credit, streamlining compliance under the RoDTEP framework, and extending duty drawback schemes. Over 55,000 small and mid-sized firms, especially in textiles, engineering, and jewellery, stand to benefit from these interventions.

Monetary policy complemented these efforts. The Reserve Bank of India lowered the repo rate by 25 basis points in April 2025 to ease borrowing costs and support liquidity. The rupee remained largely stable in the Rs 83–84 range, underpinned by forex reserves exceeding USD 650 billion. These measures helped buffer export-oriented industries from immediate volatility. India has also accelerated trade diversification efforts. With more than 40 per cent of textile exports now going to non-US markets, new outreach efforts in Latin America, Southeast Asia, and Africa are underway. Recent free trade agreements with the UAE and Australia have begun showing results—textile exports to the UAE have grown 18 per cent, and pharmaceutical exports have increased by 23 per cent. Ongoing talks with the UK and EU are expected to unlock further export potential in sectors such as processed foods, chemicals, and engineering goods.

The pharmaceutical sector continues to remain a pillar of strength. With over 40 per cent of generic drugs consumed in the US sourced from India, pharmaceutical exports grew to USD 8.7 billion in FY25. This sector’s exemption from tariffs highlighted India’s strategic value in the global health supply chain and ensured the continued flow of affordable medicines to US consumers. India is also revisiting its own tariff architecture to align more closely with international benchmarks. The current average applied tariff stands at 15 per cent, with certain sensitive sectors like automobiles and dairy facing higher duties. As part of trade negotiations, India has proposed reducing tariffs on select American agricultural imports—such as almonds and apples—amounting to over USD 700 million in bilateral trade. These gestures aim to build goodwill without compromising domestic priorities.

Exporters, too, are adapting. Manufacturers in Tirupur, Surat, and Ludhiana are exploring automation and alternate market channels. Larger firms are assessing the feasibility of nearshoring production in Mexico or Europe to mitigate tariff exposure and remain competitive. The government has supported these adaptive strategies through an expanded Rs 1,000 crore fund under the Champion Export Scheme for trade promotion and market development. India’s approach is focused not just on short-term cushioning but on long-term competitiveness. Infrastructure upgrades under PM Gati Shakti and continued investment in dedicated freight corridors are aimed at reducing logistics costs from the current 13 per cent of GDP to under 8 per cent by 2030. This structural improvement is expected to significantly enhance export margins, particularly for cost-sensitive sectors. The response to the 2025 tariffs exemplifies India’s broader strategic posture—resilient, composed, and reform-driven. The choice to engage diplomatically rather than retaliate underscores a commitment to protecting national interests without fracturing long-term partnerships. As both nations reaffirm their target of reaching USD 500 billion in bilateral trade by 2030, the groundwork laid during this phase could prove pivotal. India is positioning itself not only to withstand current challenges but to emerge stronger and more integrated into the global value chain. By prioritising engagement, bolstering competitiveness, and pursuing trade diversification, India reaffirms its role as a trusted and indispensable global economic partner.

The writer is President, ITC Corporate Affairs. Views expressed are personal